Hearst CEO Addresses the Troops

Steven Swartz, CEO of Hearst, has sent out a letter to staffers explaining what was successful in 2013, and how the company will navigate 2014. It's the typical "state of the union" note that every CEO pens, filled with phrases like "growth strategy" and "core portfolio." Still, it's worth a read. One section we found interesting is how Hearst is growing in the healthcare sector: In December, we announced the acquisition of 85 percent of Homecare Homebase, a leader in the field of providing software, data and analytics to the fast-growing homecare and hospice industries. Homecare Homebase, founded and led by CEO April Anthony, becomes the fourth significant company in the Hearst healthcare portfolio, along with First Databank, Zynx Health and MCG. In its first full year under our ownership, MCG, led by President and CEO Jon Shreve, outperformed our optimistic expectations and finished the year with profits up more than 25 percent. See below for Swartz's full note. Dear Colleagues, I want to begin by thanking each of you for your contributions to our many accomplishments over this past year. Hearst achieved record revenue and profit in 2013, and recorded its fourth consecutive year of revenue and profit growth since the recession of 2008–2009. Strong year-over-year performances came from our cable networks, A+E Networks and ESPN; Fitch Ratings; healthcare businesses First Databank and MCG, formerly Milliman Care Guidelines, acquired last December; and the newspaper group. Our U.S. magazines grew profit in 2013, and our television stations exceeded expectations and are poised for a strong 2014 with the return of the Olympics and congressional and gubernatorial elections. Our ventures team scored a very strong return on its investment in digital marketing company HootSuite. Hearst’s outstanding performance reflects the quality of what our talented colleagues create every day for the screen and the page, and the strong and innovative partnerships we forge with our clients around the world. Our profit achievement also reflects the hard work of so many who constantly look for more efficient ways to do business without compromising the quality of what we offer customers. Our business mix continues to evolve. Today, roughly 60 percent of our revenue comes from sources other than advertising revenue, including carriage fees for our cable networks and television stations, business-to-business and consumer subscription revenues, and marketing services fees. More than 20 percent of our revenue is derived from outside the U.S. On June 1, our executive vice chairman, Frank Bennack, ended his second tour of duty as our chief executive. A few weeks later, he and I spoke with our chairman, Will Hearst, and the rest of our board members about the fundamental principles of Frank’s highly successful 30-year run and how they form the basis of the company’s future growth strategy. We boiled them down to four, not necessarily in order of importance: I. Continue Remaking Our Business Mix for Growth II. Strengthen Our Core Portfolio III. Become a More Digital Company IV. Secure and Retain Top Talent I’m going to discuss each of these in the context of what we accomplished in 2013 and what we will continue to do in the years ahead. I. Continue Remaking Our Business Mix for Growth A hallmark of Frank’s tenure has been the continued allocation of capital to the sectors of the media and information landscape that have offered the best prospects for growth. While this is of course harder than it sounds, we are confident that there are two areas where we have shown particular skill and where the underlying growth prospects are quite strong: business media and entertainment. Hearst Business Media, led by Rich Malloch, was active in 2013. In December, we announced the acquisition of 85 percent of Homecare Homebase, a leader in the field of providing software, data and analytics to the fast-growing homecare and hospice industries. Homecare Homebase, founded and led by CEO April Anthony, becomes the fourth significant company in the Hearst healthcare portfolio, along with First Databank, Zynx Health and MCG. In its first full year under our ownership, MCG, led by President and CEO Jon Shreve, outperformed our optimistic expectations and finished the year with profits up more than 25 percent. First Databank acquired Design Clinicals, a company that helps hospitals reconcile the drugs a new patient is already taking with those the hospital seeks to prescribe. Under President and CEO Paul Taylor, our 50 percent–owned Fitch Ratings business acquired 7city Learning, a financial services industry training company based in London that we've renamed Fitch Learning. Meanwhile, our two principal automotive businesses kept their amazing profit-growth streaks alive: For National Auto Research/Black Book, headed by Tom Cross, it was its 22nd straight year of profit growth and for Motor Information Systems, under Kevin Carr, its 20t straight year. At our cable networks, A+E Networks announced that it will turn its BIO channel into a new lifestyle channel called FYI, bringing A+E’s singular reputation for creativity to such lifestyle subjects as food, home and travel. ESPN, led by President John Skipper, announced the creation of a new cable channel with the hugely successful SEC sports conference, featuring such powerhouse college sports teams as Alabama, Auburn and Missouri. And ESPN has secured exclusive coverage of the US Open starting in 2015, further enhancing its continuing coverage of the four major professional tennis tournaments. Our partnership with prolific television producer Mark Burnett, ONE THREE MEDIA, also had a great 2013 on the strength of its productions The Voice on NBC and Shark Tank on ABC, as well as the success of VIMBY, a 50 percent–owned ONE THREE venture that makes commercial video for key partner companies such as Wal-Mart. Mark and his wife, Roma Downey, also partnered with us to produce HISTORY’s hugely successful series The Bible. II. Strengthen Our Core Portfolio We continue to invest in our longtime franchise businesses of local television, magazines and newspapers. We supported our highly successful Omaha television station KETV by acquiring the iconic downtown train station in Omaha and beginning the process of turning it into KETV’s new home. We also became the first TV station group to partner with its network to launch TV Everywhere streaming applications when we announced our partnership with Disney’s ABC network in May. Our magazine group under David Carey launched an ambitious upgrade of all our Web and mobile products, beginning with leaders Cosmopolitan.com and ELLE.com, that will be fully unveiled in early 2014. Cosmopolitan continued to develop its branded products with the announcement of a conference business in partnership with the William Morris Endeavor agency. And Seventeen announced an exciting partnership in the fast growing world of streaming video by teaming with Dreamworks’ AwesomenessTV venture on a new streaming network for the teen market. And Hearst Newspapers President Mark Aldam’s investment in the group’s LocalEdge suite of digital marketing services products for small business customers around the country continues to bear fruit as the initiative turned solidly profitable in 2013 with revenue more than doubling. More than 40 other media entities have also signed on to sell the LocalEdge product suite in their markets, including the Los Angeles Times, Chicago Tribune, Dallas Morning News, New York Daily News and Newsday. And LocalEdge just signed its first international customer, Australia’s Fairfax newspaper group. III. Become a More Digital Company To truly succeed we can’t just offer our customers digital products; we have to become a more digital company in the way we operate our businesses every day. Under the leadership of Chief Technology Officer Phil Wiser, we launched an audience exchange to connect, for the first time, our clients to the more than 100 million unique users who visit Hearst digital products every month. We created Digital Studios to allow for fast prototyping, building and testing of new digital products. We introduced a new video platform that allows any of our journalists around the world to shoot and edit on their mobile phones. And we convened hackathons in our New York headquarters for our fashion magazine brands and on the campus of the University of Michigan for our automotive brands. IV. Secure and Retain Top Talent We are dedicated to developing and promoting our key talent from within the organization wherever possible. But as the world changes at such a rapid pace, it is also incumbent upon us to reach out to new sources of talent to gain new perspectives and new skills. We executed on both of those efforts in 2013. Beginning with internal promotions, David Barrett completed at year-end an outstanding 15-year run as CEO of Hearst Television and handed over leadership to his deputy, Jordan Wertlieb, president, and himself a 20-year veteran of the group. David will remain very active as a Hearst trustee and board member. Mike Hayes, general manager at our Pittsburgh station, WTAE-TV, came to New York as an SVP and group head. At our A+E Networks, CEO Abbe Raven became chairman after eight incredibly strong years as CEO and having run the A&E, HISTORY and BIO channels prior to becoming CEO in 2005. Nancy Dubuc, a 15-year veteran of A+E, became CEO. Nancy also named four people as general managers of our principal networks: David McKillop at A&E, Dirk Hoogstra at HISTORY, Rob Sharenow at Lifetime and Jana Bennett at the forthcoming FYI and Lifetime Movie Network. New leadership at our Entertainment & Syndication group also came from within, as the deputy in that group, George Kliavkoff, partnered with the company’s chief creative officer, Neeraj Khemlani, himself a former deputy head of E&S, to become new co-presidents. Dr. Greg Dorn, a 14-year veteran of our medical businesses, became executive vice president and deputy group head of Hearst Business Media, with primary responsibility for our healthcare businesses under Rich Malloch. Two top executives at our First Databank became executive vice presidents there, Bob Katter and Chuck Tuchinda. We also successfully went outside of the company for top talent. Hearst Magazines remade its digital leadership team with three major new hires: Troy Young, former president of Say Media, as president of digital; Todd Haskell, former head of digital advertising at The New York Times, as head of digital advertising; and Mike Smith, former president of Forbes.com, to lead our innovation efforts marrying technology and advertising sales. Private equity executive Jeff Johnson, a former publisher of the Los Angeles Times, became publisher of the San Francisco Chronicle, and Nancy Barnes, who led the Minneapolis Star Tribune to a Pulitzer Prize last year, became editor of the Houston Chronicle. Mike DeLuca, a Groupon sales leader, became president of LocalEdge. Dr. Justin Graham, formerly chief medical information officer at NorthBay Healthcare in California, became head of innovation for our healthcare operations, and David Vogler left digital ad agency The Wonderfactory to become executive creative director of Hearst Digital Studios. All our operating groups benefit from the great support provided by our corporate teams: finance, led by Chief Financial Officer Mitch Scherzer; legal, led by Chief Legal and Development Officer Jim Asher and General Counsel Eve Burton; and communications, headed by Chief Communications Officer Debra Shriver. We lost a significant member of our corporate team this year with the tragic death of Ron Doerfler, senior vice president of finance and administration. A trustee and board member, Ron served this company with great distinction for 15 years and served our partners at what was then Capital Cities/ABC (now part of our partners the Walt Disney Company) similarly for many years before that. He will be greatly missed. We head into 2014 with a great deal of optimism due in no small measure to the innovation and dedication each of you show to Hearst each day. On behalf of our chairman, Will Hearst, and executive vice chairman, Frank Bennack, I want to thank you for all you do to make this the great company that we are all so fortunate to serve. Sincerely, Steven R. Swartz President & CEO Hearst Corporation

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Hearst CEO Addresses the Troops

Chris O'Shea

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Chris O'Shea